Divorce can have a significant impact on your finances. Couples getting divorced in Texas should understand how their financial goals may be affected and take steps now to plan ahead for life after divorce.
Several factors should be considered when you are getting divorced. It is important to think about how your assets, debts and other financial obligations will impact your divorce negotiations and financial goals once the divorce has been finalized.
If you are in the process of getting divorced or are recently divorced, there are several questions to ask yourself to protect your best interests, including:
- Do you know the tax consequences of divorce? Alimony will affect both spouses. The spouse paying alimony can deduct their payments and the spouse receiving alimony will have to report it as ordinary income.
- Who will claim the children on tax returns? Only one spouse is able to claim the children on tax returns. Some spouses agree to split this deduction by each claiming the children on every other tax return.
- How will college costs be paid? Spouses should consider setting up a separate college savings account or determine how college expenses will be paid during divorce negotiations so everyone is on the same page.
- How will your retirement accounts be affected? Your retirement assets may need to be divided during the divorce.
- Will you need to change life insurance and other benefits? Do not forget to review and change the beneficiaries listed on your life insurance plan and other benefit plans.
- Will you need to change your estate plan? The same goes for your estate plan. Be sure to update your will, living will and any other estate planning documents to make sure everything is updated and correct.
It is important to be aware of the ways your divorce can impact your finances and lifestyle. Considering these factors can help you plan ahead for your future and make sure your best interests are protected. Working with a skilled family law attorney can also make sure all issues are addressed.
Source: Chicago Tribune, “5 financial facts of divorce,” Terry Savage, March 15, 2015